Perpetual Option - XPO

AAA

DEFINITION of 'Perpetual Option - XPO'

A non-standard financial option with no fixed maturity and no exercise limit. While the life of a standard option can vary from a few days to several years, a perpetual option (XPO) can be exercised at any time. Perpetual options are considered an American option; European options can be exercised only on the option's maturity date.

Also referred to as "non-expiring options" or "expirationless options."

INVESTOPEDIA EXPLAINS 'Perpetual Option - XPO'

For investors, perpetual options represent the highest ratio of possible risk/reward payoff compared to existing financial products. Perpetual options are viewed as "plain vanilla" options. For many investors they represent an advantage over other instruments (where dividends and/or voting rights are not a high priority) because the strike price on a perpetual option enables the holder to choose the buy or sell price point instead of having to select a singular stock price. In addition, XPOs can be preferable to standard options because they eliminate the expiration risk.

RELATED TERMS
  1. American Option

    An option that can be exercised anytime during its life. American ...
  2. European Option

    An option that can only be exercised at the end of its life, ...
  3. Risk

    The chance that an investment's actual return will be different ...
  4. Risk-Return Tradeoff

    The principle that potential return rises with an increase in ...
  5. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. thinkstock|istock
    Options & Futures

    How To Avoid Closing Options Below Intrinsic ...

  2. Options & Futures

    Dividends, Interest Rates And Their ...

  3. Options & Futures

    Using Options Tools To Trade Foreign-Exchange ...

  4. Options & Futures

    Do Option Sellers Have a Trading Edge?

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center